Mose et al v. Keybank National Association

Filing 22

RULING denying 19 Pltfs Motion to Disqualify Jones Day as Defts Counsel. Signed by Judge James J. Brady on 7/13/2011. (JDL)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
ANTHONY MOSE, JR., ET AL
CIVIL ACTION
VERSUS
NO. 11-162-JJB-SCR
KEYBANK NATIONAL ASSOCIATION

RULING ON PLAINTIFFS’ MOTION TO DISQUALIFY DEFENDANT’S
COUNSEL
This matter is before the Court on Plaintiffs’ Motion (doc. 19) to Disqualify
Jones Day as Defendant’s Counsel. Defendant has filed an opposition (doc. 21).
There is no need for oral argument. This Court’s jurisdiction exists pursuant to
28 U.S.C. § 1332. For the reasons stated herein, the Court DENIES Plaintiffs’
motion.
Background
In July 2006, Defendant Keybank National Association (“Keybank”)
contracted with developers (“the Developers”) to loan over $170 million for the
construction of a massive mixed-residential-and-commercial development (“the
Development”). Soon thereafter, the Developers began to suffer from budget
shortfalls. As a result, Developers opted to convert some of the Development’s
apartments into condominiums and sought Keybank’s contractually required
approval to do so.

In support of their proposal, the Developers submitted

documents to Keybank which were reviewed by Scott Specht (“Specht”) and
Michael Lee (“Lee”) of Jones Day. Ultimately, Keybank approved the conversion
and thereafter, the unfinished units were sold to Plaintiffs.
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However, the

Development continued to be over-budget, and, in 2009, all construction ceased,
leaving much of the Development uncompleted. As a result, the Plaintiffs paid
far more for their condominiums than they ended up being worth.
On March 18, 2011, Plaintiffs filed suit against Keybank alleging that it
knew the project could not be completed but nonetheless approved the
conversion and the marketing and sale of the condominiums (“the Condo
Marketing Scheme”). On May 31, 2011, attorneys at Jones Day, Samantha R.
Mandell (“Mandell”) and Janine Cone Metcalf (“Metcalf”) filed motions (docs. 11
& 13, respectively) to enroll as Keybank’s counsel, which were granted that same
day (doc. 14). At that time, Jones Day had been serving as Keybank’s counsel in
various suits surrounding the development for nearly two years.
On June 15, 2011, Plaintiffs filed their Motion (doc. 19) to Disqualify Jones
Day as Keybank’s counsel.

Plaintiffs assert that Jones Day should be

disqualified because Specht and Lee may be called to testify as to the
circumstances surrounding the approval of the Condo Marketing Scheme and
may tactically and unfairly try to assert attorney-client privilege.

In addition,

Plaintiffs assert that, to the extent that Jones Day participated in the alleged
fraud, it may be made a third-party defendant. If so, Plaintiffs claim, Jones Day’s
representation of Keybank may be materially limited in violation of the Louisiana
Rules of Professional Conduct (“LRPC”).
On July 6, 2011, Keybank filed its opposition (doc. 21). Keybank asserts
that disqualification is inappropriate because Plaintiffs have not proven that an
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actual conflict of interest exists, either due to the possibility of Jones Day acting
as a witness or being named a third-party defendant.

In addition, Keybank

asserts that disqualifying Jones Day as counsel will not affect the proceedings
because (1) even as a former client, Keybank may assert attorney-client privilege
and prevent Jones Day from testifying; and (2) to the extent that discussions
between Keybank and Jones Day regarded mere business advice or were made
in furtherance of a crime or fraud, they are not protected by the attorney-client
privilege.
Motions to disqualify counsel are “generally disfavored” and “require a high
standard of proof” so as to not deprive a party of its chosen counsel. Fed.
Deposit Ins. Corp. v. United States Fire Ins. Co., 50 F.3d 1304 (5th Cir. 1995); In
re Katrina Canal Breaches Consol. Litig., 2008 WL 3845228, at *3 (E.D. La. Aug.
13, 2008). According to LRPC 3.7(b), “[a] lawyer may act as advocate in a trial in
which another lawyer in the lawyer’s firm is likely to be called as a witness unless
precluded from doing so by Rule 1.7 or Rule 1.9.” LRPC 1.7(a) states that a
lawyer shall not represent a client if “there is a significant risk that the
representation . . . will be materially limited by the lawyer’s responsibilities to
another client, a former client or a third person or by a personal interest of the
lawyer.”

However, even if such a risk exists, the lawyer may nonetheless

represent the client if (1) the lawyer reasonably believes that he will be able to
provide competent and diligent representation; (2) the representation is not
prohibited by law; (3) the representation does not involve claims against clients;
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and (4) each client gives informed consent, confirmed in writing. LRCP 1.7(b).
Indeed, the United States Court of Appeals for the Fifth Circuit has found that
conflicts of interest between an attorney and client should be settled by those
parties and has noted the danger of allowing the opposing party to control the
client’s choice of counsel:
Ideally, conflict of interest problems should be settled
between the attorney and his client. Where an
attorney's testimony may prejudice only his own client,
the opposing party should have no say in whether or not
the attorney participates in the litigation as both
advocate and witness. . . . [A]n opposing party [may]
bring conflict of interest matters to the attention of the
court [but] “[s]uch an objection should be viewed with
caution, however, for it can be misused as a technique
of harassment. . . .”
A tortured justification for
disqualification such as that offered by [Defendant]
premised on a purported possible conflict of interest
sometime in the future, suggests not so much a
conscientious professional concern for the profession
and the client of the opposing counsel as a tactic
designed to delay and harass.
F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1315 (5th Cir. 1995) (emphasis
added). See also CEF Funding, LLC v. Sher Garner Richter Klein & Hibbert,
LLC, 2010 WL 2773116, at *2 (E.D. La. July 9, 2010) (stating that a “court must
be especially sensitive to potential abuse when, as here, the party seeking
disqualification is also the one wanting to call the attorney as a witness”). Any
disqualification must be “linked to an actual, real conflict rather than an imaginary

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one.” In re: Complaint of Cardinal Servs., Inc., 2006 WL 2089925, at *3 (W.D.
La. July 21, 2006). 1
The attorney-client privilege permits a client to obtain candid legal advice
by allowing a client who invokes the privilege to prevent his attorney from
testifying as to the content of their communications. Upjohn Co. v. United States,
449 U.S. 383, 394 (1981). Courts have made it clear that the privilege belongs to
the client and that a client may prevent not only its current counsel from revealing
the content of their communications, but its former counsel as well. Employers
Mut. Cas. Co. v. Maison Heidelberg, P.A., 2011 WL 1496253, at *2 (S.D. Miss.
April 20, 2011); La. Evid. Code Arts. 506 & 508. However, the attorney-client
privilege has its limits and does not protect (1) the facts underlying the
communication; 2 (2) communications either not initiated by the client or initiated

1

According to the Fifth Circuit court:
Unless an impermissible conflict of interest exists between a testifying
lawyer and her client, Model Rule 3.7 . . . does not mandate the vicarious
disqualification of the lawyer's firm. . . . [I]t is possible that, sometime in
the future, the interests of [the lawyer] and [her client] might diverge. . . .
[The party moving for disqualification] contends that this potential conflict
of interest between [the attorney] and her client requires the
disqualification of [the attorney] and the imputed disqualification of her
entire firm. We find that the remote possibility that [the attorney] and [her
client] may eventually find themselves at odds is much too tenuous a
thread to support the burdensome sanction of law firm disqualification.

U.S. Fire Ins. Co., 50 F.3d at 1313-14.
The attorney-client privilege only applies to communications rather than the facts underlying the
communication. Upjohn Co., 449 U.S. at 395-96. That is, a party cannot conceal a fact simply by
revealing it to his lawyer. Id. at 396.

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by the client to obtain something other than legal advice; 3 and (3)
communications sought in furtherance of criminal or fraudulent conduct. 4
The Court finds that disqualification is inappropriate here. With regard to
potential conflicts, the Fifth Circuit has made clear that conflict of interests are
generally best-settled between the client and his attorney and that the party
moving for disqualification must meet a “high degree of proof” to show that an
“actual conflict”—and not some hypothetical one—exists. U.S. Fire Ins. Co., 50
F.3d at 1313-14; In re Katrina Canal Breaches Consol. Litig., 2008 WL 3845228,
at *3. That members of Jones Day might be made third-party defendants at
some unknown point in the future is pure conjecture and may not underlie a
disqualification. See id.
Moreover, though Specht and Lee may serve as witnesses at trial, Mandell
and Metcalf are representing Keybank in this litigation. The LRPC expressly
allow a “lawyer [to] act as advocate in a trial in which another lawyer in the
lawyer’s firm is likely to be called as a witness” unless “there is a significant risk
that the representation . . . will be materially limited by the lawyer’s
responsibilities to another client, a former client or a third person or by a personal
interest of the lawyer.” LRCP 3.7. However, even in these instances, a court will
3

Courts have distinguished between legal communications—communications between an attorney and a
client, initiated by the client for the purpose of the client’s securing legal advice—and business
communications—communications in which the attorney performs some other service for the client.
Upjohn Co., 449 U.S. at 395-96; In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731
F.2d 1032, 1037 (2d Cir. 1984).
4
United States v. Ballard, 779 F.2d 287, 292 (5th Cir. 1986); United States v. Jacobs, 117 F.3d 82, 87
(2d Cir. 1997).

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not deprive a party of its choice of counsel if the lawyer reasonably believes the
conflict will not affect his ability to represent the client and the client agrees to the
representation, along with other inapplicable caveats. LRCP 1.7(b). Plaintiffs
have not satisfied the Court that Mandell and Metcalf’s representation of
Keybank will in any way be limited by the prospect of Specht and Lee appearing
as witnesses.

Even if it did, Keybank could waive the conflict simply by

consenting to the representation. LRCP 1.7(b).
Moreover, even if Mandell and Metcalf were disqualified, Keybank could
still assert attorney-client privilege over its communications with Specht and Lee.
The attorney-client privilege belongs to the client, rather than the attorney, and it
applies not only to the client’s present attorney but to the client’s former attorney.
Maison Heidelberg, P.A., 2011 WL 1496253, at *2. Thus, regardless of who
replaced Mandell and Metcalf as counsel, Keybank would be entitled to assert
attorney-client privilege over his legal communications with Specht and Lee.
Additionally, to the extent that Specht and Lee gave Keybank non-legal advice or
advice in furtherance of Keybank’s allegedly fraudulent scheme to build, market
and sell the Development’s condominiums, those communications are not
protected by the attorney-client privilege.

Upjohn Co., 449 U.S. at 395-96.

Finally, the attorney-client privilege would only protect communications between
Specht and Lee and Keybank for the purpose of obtaining legal advice; it would
not protect the facts underlying those communications. Id.

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Conclusion
Accordingly, the Court hereby DENIES Plaintiffs’ Motion (doc. 19) to
Disqualify Jones Day as Defendant’s Counsel.
Signed in Baton Rouge, LA this 13th day of July, 2011.

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JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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